Colorado oil, gas commission rebrands to oversee geothermal energy

The agency that regulates oil and gas in Colorado has a new name and new duties, which include building a regulatory framework for the growing geothermal energy sector that is a priority for Gov. Jared Polis.

The Colorado Oil and Gas Conservation Commission is now the Colorado Energy and Carbon Management Commission. The name, which took effect July 1, broadens the agency’s scope to encompass geothermal, underground natural gas storage; and carbon capture and sequestration to cut carbon dioxide emissions.

The new law authorizing the change aims to expand the agency’s authority over “a broader scope of energy and carbon management areas beyond oil and gas.”

Jeff Robbins, chairman of what’s now called “ECMC” for short, believes the commission is the logical choice to oversee geothermal and the other areas. The agency approves permits for oil and gas wells, which are being used to reach hot, underground water to generate geothermal energy.

“We think that it was a recognition that Colorado needed to create regulatory pathways for these new energy areas,” Robbins said.

To get things going, the law requires the commission to conduct various studies, including a technical  evaluation of the state’s geothermal resources and a review in conjunction with the state engineer of the current geothermal regulations.

“We had to make some decisions about priority,” Robbins said. “Geothermal is going to be first out of the gate, followed quickly by carbon capture and sequestration.”

Mike Rigby, who has been studying the three new areas for the commission, has been named coordinator for the new programs.

The state engineer will regulate projects that use water connected to the surface and is less than 2,500 feet deep. Megan Castle, ECMC spokeswoman, said the state engineer’s office will also retain authority over the administration of water rights and water use associated with geothermal projects, including deep ones.

Colorado is among the states seen as having strong potential for geothermal energy development. The report “The Heat Beneath Our Feet” by the Western Governors’ Association said the U.S. accounts for 25% of the world’s installed geothermal energy capacity and the West contains 95% of that capacity.

Polis’ top initiative as chairman of the Western Governors’ Association over the past year was to advance the development of geothermal energy in the West. He has said that tapping the heat underground to generate electricity could provide low-cost, reliable power to help make the transition from fossil fuels to wind, solar and other carbon-free energy sources.

Legislation passed in 2022 and this year established a geothermal grant program and tax incentives to promote using geothermal for heating and cooling.

The governor’s focus and the interest by companies led the ECMC to prioritize geothermal in terms of which studies and new rules to work on first, Robbins said. The commission plans to start work this year or early 2024.

“Over the last year and a half or so, as chairman of the commission, I’ve had a number of different discussions with companies that are interested in looking at the (Denver-Julesburg) Basin in particular for the potential of geothermal development,” Robbins said.

Emerging industry

One of those companies is Denver-based Transitional Energy, which is working with oil and gas operators in Colorado, Nevada and other states to develop geothermal sources for electricity. Johanna Ostrum, the chief operating officer, and other employees previously worked in the oil and gas industry.

Transitional Energy teamed with an oil and gas company last year in Nevada to use what would normally be wasted heat to generate electricity at the site. Ostrum said the geothermal company will use a $2.75 million grant from the Department of Energy to generate 1 megawatt of electricity from a Nevada oil field over the next four years. The  company is working with the National Renewable Energy Laboratory on the project.

Companies are looking at tapping hot water produced during oil and gas operations to power equipment to make electricity or using abandoned oil and gas wells to inject water into, which is warmed and then tapped to generate power.

Ostrum said companies typically view the hot water that’s a byproduct of oil and gas operations as a safety risk or a cost.

“It’s too hot for the pipeline or it’s too hot for the (oil and gas) separators. They’re going to pay to cool it down,” Ostrum said. “Our philosophy is this is geothermal energy. We should be capturing it.”

Transitional Energy is working with oil and gas producers in the Raton and Denver-Julesburg basins in Colorado and in Texas and North Dakota. The company’s methods are designed to produce geothermal energy in lower-temperature zones, which it says opens up more potential sites.

Ostrum thinks the Western Governors’ Initiative and recent state and federal legislation will help drive geothermal development. She said people have looked at Colorado’s resources for years.

“It’s just that there was a lack of financial interest because geothermal had such a long development timeline and there was risk associated with that,” Ostrum said.

Transitional Energy is watching as the ECMC works through rules for the new programs. Ostrum said one of the questions is how to treat a well that produces oil and gas along with geothermal energy. And she said although the skills and techniques for oil and gas and geothermal might overlap, geothermal regulations can’t just be cut and pasted from oil and gas rules.

The oil and gas industry and a number of interest groups participated in a series of hearings and meetings on a sweeping revamp of oil and gas rules mandated by a 2019 law. Now, the industry is watching as the ECMC sets about writing regulations for geothermal energy, underground natural gas storage and carbon capture and sequestration.

“We were supportive of the proposed change during the legislative session and remain so with the caveat, and it’s a significant caveat, that the commission not get distracted from its priority of processing oil and natural gas permits,” Dan Haley, president and CEO of the Colorado Oil and Gas Association, a trade group, said in an email.

Colorado regulators across agencies have faced heavier workloads “due in part to an overwhelming rulemaking schedule and incredibly onerous review standards,” said Kait Schwartz, director of American Petroleum Institute-Colorado. She said in an email that her organization hopes the ECMC will have enough resources for its new programs while keeping up with its existing and growing duties related to oil and gas.

Robbins, ECMC chairman, said the new programs won’t change how the commission deals with oil and gas. He believes the agency did a good job of implementing the new oil and gas regulations and said the legislature approved 43 new full-time positions to continue the work.

The legislation expanding the commission’s work includes $1.1 million for expenses. As the ECMC establishes regulations and protocols for the additional programs, Robbins said “we should get a better sense then of the needs for those new areas down the road.”

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